The town's coat of arms represents the history of the region, recalling the pre-Slavic Illyrian people that once populated the area, along with their shipbuilding past. The town's current coat of arms was adopted in the mid-19th century and is only a slight modification of the coat of arms of the Kingdom of Illyria.

In the 12th century a fortress was erected at the site of a prehistoric settlement on a hill east of the town centre, when the area was part of the Imperial March of Carniola. The castle later was held by the Counts of Duino, from the 14th century onwards by the princely House of Auersperg in Postojna.

Within the last 100 years, the town's history has been primarily shaped by the nations that have occupied it. Bistrica has been under the control of the Austro-Hungarian Empire since 1867, was annexed by the Kingdom of Italy in 1920, it became part of Yugoslavia after World War II and finally of independent Slovenia. Remnants of this can still be seen in numerous monuments, the railway station, and the Italian barracks from the Second World War.

During last days of World War II, the 97th Army Corps under command of GermanGeneral der GebirgstruppeLudwig Kübler were defending the defensive area between Rijeka and Mount Snežnik, also known as Ingridstellung or defensive line Ingrid. Their task was to halt the Yugoslav advance toward Trieste and Ljubljana, threatening the rear of both Army Groups C and E.
The 97th Army Corps became encircled in area around Ilirska Bistrica and Mount Snežnik, when Tito ordered the 4th Army to bypass the 97th Corps and capture Trieste. Only after the Partisans captured Trieste was the 97th Corps ordered to break through toward Iliriska Bistrica, Postojna, and Ljubljana. The breakthrough began on the night of May 2 in a hedgehog formation. During May 5 and 6, the corps managed to capture Iliriska Bistrica, but further advance become impossible and on May 7 at 6:04 am a capitulation was signed. Around 16,000 soldiers, 40 senior officers, and three generals become prisoners of war. Captured equipment included 31 tanks, 841 artillery pieces, 536 mortars, 1,670 machine-guns, 2,468 light machine-guns, and 716 various motor vehicles.

In 1991, during the Ten-Day War on June 27, 1991 the Slovenian Territorial Defence blocked the road connecting Rijeka and its 13th Infantry Corps of Yugoslav People's Army with the interior of Slovenia. Later on the same day, the Slovenian Territorial Defence launched an attack on a Yugoslav People's Army column in Koseze near Ilirska Bistrica. After fierce fighting between the Slovenian Territorial Defence and Yugoslav People's Army, the Yugoslav People's Army retreated. The battle resulted in three dead Yugoslav People's Army soldiers and several wounded soldiers on both sides.

Ilirska Bistrica is the site of two known mass graves from the Second World War. The Stražica Mass Grave (Slovene: Grobišče pod Stražico), also known as the Black Fields Mass Grave (Grobišče Črne njive), is located north of the town, about 170 m north of the summit of Stražica Hill. It contained the remains of German soldiers from the 97th Corps that fell at the beginning of May 1945. The grave has been exhumed.[2]

The Cemetery Mass Grave (Grobišče pod pokopališčem) is located next to the town cemetery. It contains the remains of 82 German soldiers buried in a former firing trench. An asphalt road and parking lot were laid over the grave when the cemetery was expanded.[3]

The town is used by tourists and trekkers as a starting point for travelling to the top of the Snežnik Plateau, a day-long round trip from Ilirska Bistrica. At 1,796 m (5,892 ft), the plateau's highest peak, Big Mount Snežnik (Slovene: Veliki Snežnik), is the highest non-Alpine peak in Slovenia.